High inventory levels, poor demand dampens sentiment in Asian PP markets

Several homo-PP sellers in China have reduced prices this week as buyers prefer to maintain a wait and watch stance due to bearish sentiments about the market outlook triggered by several large new capacities that have come on-line in the previous months, as per Chemorbis. Besides the several new plants that have started up last month, the market expects to see additional new capacities from PetroVietnam’s 150,000 tpa PP plant, Sinopec Zhenhai’s 300,000 tps PP plant, Thai Siam Cement Group’s 400,000 tpa PP plant expected to operate with higher run rates this month and Thai HMC Polymer’s 300,000 tpa PP plant to be started up in August. In order to cope with waning demand, several overseas producers agreed to price reductions of US$20-80/ton on their import homo-PP offers to China this week, with the country’s spot market retreating for the fourth week in a row. Akin to sales pressure on import sellers, domestic producers in China have also been suffering from rising stocks versus lackluster demand. As ongoing economic concerns, along with lower spot propylene costs in Asia have dampened sentiment further, most domestic producers cut their offers by around CNY150-200/ton (US$22-30/ton) this week. The news that three Chinese PP producers including Daqing Refinery, Yangzi Petrochemical and Ningbo Formosa are planning to conduct maintenance shutdowns at their plants with 400,000 tpa, 300,000 tpa and 450,000 tpa PP capacity next month have not yet helped overcome effects of the sluggish demand conditions and rising inventory pressure in the region. Meanwhile, larger price reductions of US$60-80/ton were reported from Indonesia’s domestic PP market. Similar dynamics are also in effect in the Southeast Asian PP market, with major Middle Eastern and Southeast Asian producers cutting their import offers by a similar amount this week in hopes of improving their sales. Due to converters’ confidence about a softer market outlook for the near term, sellers’ price reductions have not lead to a visible revival in demand for now as buyers continue meeting their needs on a hand to mouth basis.
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